"But, alas, Dodd-Frank, while toughening up some rules, actually did the opposite: It took critical "firefighting" tools away from the Fed, the FDIC and Treasury."

Some of the biggest implications of this will be what to do about state pensions as they fail. By law states can't declare bankruptcy, but considering that despite 9 straight years of recovery in the stock markets, pension plan asset and unfunded liability gaps have widened during that time, that is absolutely insane, so yeah, "heaven help us" is right. If public pensions actually get worse during one of the longest bull markets in history, then what happens to them during a protracted downturn/recession? Implosion. Exodus from the badly managed states (e.g. Illinois, New Jersey, Connecticut, Kentucky), because people will not voluntarily and indefinitely subject themselves to ever-rising taxes in states that have utterly failed to manage their pensions.

I so don't want to think about it! I'm watching my 'funds' like a hawk. (I will BAIL early this time! I don't have 10 years to regain my losses). Man, there were some big ass brains in there last time. WE DO NOT HAVE THAT KIND OF FIRE POWER anywhere in the WH or the FED or CONGRESS!!!!!!!!!!!! I don't give one good GD if the idiots on this board don't realize what OBAMA and his team managed to pull off. It was short of a GD miracle.

This is not hyperbole. If it happens again, we're fucked. And the world is even dicier now.

Some of the biggest implications of this will be what to do about state pensions as they fail. By law states can't declare bankruptcy, but considering that despite 9 straight years of recovery in the stock markets, pension plan asset and unfunded liability gaps have widened during that time, that is absolutely insane, so yeah, "heaven help us" is right. If public pensions actually get worse during one of the longest bull markets in history, then what happens to them during a protracted downturn/recession? Implosion. Exodus from the badly managed states (e.g. Illinois, New Jersey, Connecticut, Kentucky), because people will not voluntarily and indefinitely subject themselves to ever-rising taxes in states that have utterly failed to manage their pensions.

To add a little outside material/support to my opinion on this (borrowing from a post I shared elsewhere), let's start with the worst state (although there are 19 more that have critically underfunded pensions):

It takes an incredible amount of financial and actuarial analyses to determine exactly what type and magnitude of tax increases would be necessary for Illinois to climb out of that problem, while also considering the complex economic estimate of what the tax base will tolerate in the way of tax increases. Exodus in response to tax increases makes the tax increases ineffective.

The mechanism by which pensions are funded is participant contributions based on current payrolls. For each dollar of state/municipal payroll, $X.XX must be contributed to the pension fund's unfunded liability. This has the same effect as tax increases because public employer contributions derive from taxes. So why hasn't the long-time Democrat-controlled legislature in Illinois increased the contributions as necessary to shore up the pension system in recent years? Because astronomically high participant contributions (e.g. from municipalities) push cities into a situation where they have to either drastically cut personnel (services) or be pushed to the brink of bankruptcy themselves. That's not an option. So it would require reform to state that general fund (tax) revenue be also dumped into the pension system, and it's very hard for anyone (even people like Governors, or Ivy League economists) to determine exactly what tax increases a jurisdiction will bear. Evidence is businesses and residents already fleeing, dramatic tax increases would only accelerate that trend, rendering the tax increases ineffective as the tax base itself shrinks.

States can effectively go bankrupt even if law doesn't provide them a means by which to declare it and deal with its debtors. Arkansas went through something similar in 1933. We've been lucky enough to have no more recent history of state defaults since then. But with an even modest recessionary environment, state pensions are positioned to push numerous states into this situation again. When this happens, benefits will be cut, drastically, because they have to be. There is no other way for them not to be*, all the blue-faced protesting from public labor unions notwithstanding.

*there is one alternative, which is the feds seizing control of all state pension systems. They can't bail out one at a time because that signals to all other states that they are idiots to fully fund their pension systems. We've seen how numerous states underfund their pensions even without evidence the feds will bail their pensions out, so think of what they'd do with evidence that they'd be bailed out. This would be as big of moral hazard, if not bigger, than TARP bailouts that saved the banks and bankers. Federally bailing out state pensions as they fail is a clear signal to every other state that adequately funding their pension is stupid, because the feds will prop it up when it fails. So any remotely sensible federal intervention would have to be total. Seizing all state pension systems from state management. And then the feds would have to dole out benefits fairly, which should mean giving some pain (reduce benefits) to the residents of states that were badly managed, and throw a bone to the states that were well-managed. This entire idea is extremely dramatic to the point of seeming outlandish, but that's what it would take.

I so don't want to think about it! I'm watching my 'funds' like a hawk. (I will BAIL early this time! I don't have 10 years to regain my losses). Man, there were some big ass brains in there last time. WE DO NOT HAVE THAT KIND OF FIRE POWER anywhere in the WH or the FED or CONGRESS!!!!!!!!!!!! I don't give one good GD if the idiots on this board don't realize what OBAMA and his team managed to pull off. It was short of a GD miracle.

This is not hyperbole. If it happens again, we're fucked. And the world is even dicier now.

To add a little outside material/support to my opinion on this (borrowing from a post I shared elsewhere), let's start with the worst state (although there are 19 more that have critically underfunded pensions):

It takes an incredible amount of financial and actuarial analyses to determine exactly what type and magnitude of tax increases would be necessary for Illinois to climb out of that problem, while also considering the complex economic estimate of what the tax base will tolerate in the way of tax increases. Exodus in response to tax increases makes the tax increases ineffective.

The mechanism by which pensions are funded is participant contributions based on current payrolls. For each dollar of state/municipal payroll, $X.XX must be contributed to the pension fund's unfunded liability. This has the same effect as tax increases because public employer contributions derive from taxes. So why hasn't the long-time Democrat-controlled legislature in Illinois increased the contributions as necessary to shore up the pension system in recent years? Because astronomically high participant contributions (e.g. from municipalities) push cities into a situation where they have to either drastically cut personnel (services) or be pushed to the brink of bankruptcy themselves. That's not an option. So it would require reform to state that general fund (tax) revenue be also dumped into the pension system, and it's very hard for anyone (even people like Governors, or Ivy League economists) to determine exactly what tax increases a jurisdiction will bear. Evidence is businesses and residents already fleeing, dramatic tax increases would only accelerate that trend, rendering the tax increases ineffective as the tax base itself shrinks.

States can effectively go bankrupt even if law doesn't provide them a means by which to declare it and deal with its debtors. Arkansas went through something similar in 1933. We've been lucky enough to have no more recent history of state defaults since then. But with an even modest recessionary environment, state pensions are positioned to push numerous states into this situation again. When this happens, benefits will be cut, drastically, because they have to be. There is no other way for them not to be*, all the blue-faced protesting from public labor unions notwithstanding.

*there is one alternative, which is the feds seizing control of all state pension systems. They can't bail out one at a time because that signals to all other states that they are idiots to fully fund their pension systems. We've seen how numerous states underfund their pensions even without evidence the feds will bail their pensions out, so think of what they'd do with evidence that they'd be bailed out. This would be as big of moral hazard, if not bigger, than TARP bailouts that saved the banks and bankers. Federally bailing out state pensions as they fail is a clear signal to every other state that adequately funding their pension is stupid, because the feds will prop it up when it fails. So any remotely sensible federal intervention would have to be total. Seizing all state pension systems from state management. And then the feds would have to dole out benefits fairly, which should mean giving some pain (reduce benefits) to the residents of states that were badly managed, and throw a bone to the states that were well-managed. This entire idea is extremely dramatic to the point of seeming outlandish, but that's what it would take.

Illinois is the poster child of failed liberal, Democrat, labor-union-controlled public policy. Though that's not to say Republican-dominated states necessarily have rock solid track records. However Illinois takes the cake as the quintessential failed liberal state. New Jersey is close behind.

Utter bullshit. Wall Street was most certainly NOT stable by the time Obama took office. It continued its FRIGHTENING decline, as did markets ALL OVER THE WORLD, until that red-letter date in stock market history that you SHOULD know about, March 9, 2009, which marked a multi-decade low in America's stock market, as well as in some other markets around the world. At the time Obama took office, manufacturing was in a worldwide global COLLAPSE, as I have also proven to you, but as you have apparently forgotten. The recession did NOT end "on its own" but was greatly assisted in crawling out of the hole by TARP and ARRA. After the passage and signing of ARRA in particular, we saw an ENORMOUS surge in consumer confidence.

AND, we've been through all this before, Libertine. Why oh why oh why do you continue to blatantly LIE about this??

Finally, June is almost HALF A YEAR after Obama took office, not a 'few months'. What TERRIBLE arithmetic.

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